How Do Financial Distress Risk and Related Party Transactions Affect Financial Reporting Quality? Empirical Evidence from Iran

The paper aims to investigate the effects of financial distress risk (FDR) and related party transactions (RPT) on reporting quality (FRQ) in an emerging market called Iran. In this study, ordinary least squares regression (OLS) method is employed test hypotheses; moreover, Jones’ discretionary accruals model used assess (FRQ). results show financially distressed companies have a lower because they try mislead other stakeholders about corporate actual performance attract more investors lenders. Consistent with “tunneling” or “conflict interests transaction” assumption, our findings confirm there positive association between through loan accrual-based profit management. words, Iranian managers participate loan-related expropriate their firm’s resources then manipulate statements mask such expropriation. Finally, additional analysis indicates that seen well among firms having higher sale growth institutional owners, whereas variables ROA leverage negatively affect information quality.